This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Earnings Embolden Litigious SCO

Updated from 7:52 a.m. EDT

SCO Group (SCOX) , the feisty gatekeeper to much Unix technology, earned $3.1 million in its third quarter and said it laid in enough cash flow to continue suing everyone over its intellectual property.

Lindon, Utah-based SCO earned $3.1 million, or 19 cents a share, on revenue of $20.1 million, compared with a loss of $4.5 million, or 35 cents a share, on revenue of $15.4 million a year ago. Third-quarter revenue from its operating system platforms was $12.8 million, while revenue from its SCOsource licensing initiative was $7.3 million. The initiative involves generating license revenue from the intellectual property that SCO claims in a controversial suit against IBM (IBM) has been misappropriated in Linux open-source software.

"These results have strengthened our balance sheet and overall financial position," SCO said. "We intend to use this capital to continue our intellectual property protection and licensing initiative as well as for launching SCOx, our Web services strategy."

The comments wouldn't rate notice but for the fact that SCO shares have been on a tear (recently curtailed) after the company sued IBM in March, alleging the computer giant misappropriated its Unix code for Linux business. IBM filed a countersuit Aug. 7, claiming SCO breached the general public license for Linux and infringed on four IBM patents.

SCO has threatened numerous other suits and retained all-purpose litigator David Boies for its dirty work. On a conference call Thursday morning, the company said it has budgeted about $1 million per quarter for legal costs, but incurred less than $500,000 in the third quarter in legal charges. In addition to paying discounted fees, SCO will pay Boies a portion of any money generated from the suit, the company said.

The quarter marked the second consecutive one in which SCO has operated in the black, thanks to its licensing initiative. Microsoft (MSFT), whose proprietary software has been threatened by Linux, and Sun Microsystems, a Microsoft foe, are the only two companies who have publicly disclosed deals to license SCO software, netting SCO $13.3 million in 2003.

This week SCO announced another Fortune 500 company has signed a license, but declined to disclose its name and terms of the agreement. The company has said there are 2.5 million servers with its software; it is charging an introductory licensing fee of $699 per CPU.

"Obviously, the opportunity is in the multi-billions of dollars," SCO CEO Darl McBride said in the conference call. "We've always said SCO needs to be compensated for the infringement that has gone on with Linux."

Before launching its licensing program, SCO was suffering declining revenues, like much of the tech industry hurt by the economic downturn. Last year, faced with lower-than-anticipated revenue, SCO announced a restructuring that included cutting 15% of its staff, or 73 employees, bringing the total workforce to 400 employees.

The company expects fourth-quarter revenue of $22 million to $25 million, with $10 million to $12 million coming from its new licensing campaign. "The magnitude of our SCOsource licensing opportunities and our confidence in the SCOsource revenue pipeline is growing each quarter," it warned.

SCO also took on charges from detractors that insiders have been selling shares in large numbers. In a separate press release, SCO noted that four executives have been selling through a plan that establishes sales at predetermined times and under specific conditions, without subsequent instructions from the participants. Such plans are often set up to avoid violation of insider trading rules.

In the third quarter, individuals selling stock under such plans sold 88,000 shares. Two other executives without such plans sold 29,616 shares during that period on their own initiative. McBride pointed out on the conference call that he has not sold any of his shares.

SCO shares gained 91 cents, or 9%, Thursday to hit $11.84 in recent trading. That's more than 10 times their value on Feb. 13, the low for the year.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs